Gross: Bond Funds Need to Beat Inflation

VIDEO: Investors' demand for yield makes it impractical for bond funds to eliminate all duration risk, says PIMCO's Bill Gross

Eric Jacobson 20 April, 2011 | 3:32PM
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In Part IV of the series of interviews PIMCO’s acclaimed and widely cited fund manager Bill Gross gave to Morningstar, Gross explains that in the current climate managing a bond fund with the objective of beating inflation calls for an investment strategy which is less constrained in terms of selecting bond duration. Bill Gross spoke to Morningstar’s Director of Fixed Income Research Eric Jacobson shortly before S&P downgraded its rating for US sovereign debt. See Part I: Treasuries’ Risk-Reward Balance Is Off and Part II: Better Sovereign Debt Opportunities Outside US, and Part III: Bond Investors' Menus Need to Expand.

 

Eric Jacobson: As you know, there is this space of, as PIMCO calls it, the unconstrained bond space. A lot of firms are using similar terminology. Just to make the comparison, Total Return last I saw, as you said, was on an overall basis short of its benchmark in terms of duration but not certainly down in the zero range.

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Eric Jacobson  is director of fixed-income research with Morningstar.

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